Many types of mortgage financing allow for GIFT FUNDS to be used towards down payment. The basics?
* Gift funds need to come from a blood relative (“donor”)

* The “donor” needs to be willing to provide the “source” of the funds. This can be a bit tricky as many times the relative does NOT want to provide bank statements or asset statements to show where the money came from. There is no way around this so prepare for it from the beginning.

* The “donor’s” bank statement can not show any LARGE deposits into it in the statement period. The reason for this is the underwriter wants to see that the “gift funds’ are not borrowed funds requiring a repayment.

* The “donor” will sign a gift letter stating they are gifting the funds from Account “X” and that the funds do not have to be repaid.

* Those funds should then be wired directly to the escrow company handling the transaction. This helps to avoid having to “paper trail” the funds through the borrowers account and again to escrow. If the “donor” sends the funds directly to the escrow company it eliminates this step.

Remember, on FHA loans, 100% of the down payment AND closing costs can be gifted.

Be sure to check on the specific type of CONVENTIONAL loan you are qualified for as to the allowable “gift funds” per your program.

Ready to get started? You can apply ONLINE conveniently at www.fcfs.net

1. First and foremost, buying a home is in the top 5 most stressful things one will do in their lifetime. I certainly do not expect you to understand what, when, why and how. ASK! Call. E-mail or to make it a bit easier there is also a wealth of information online.

There is. Basically (although unbelievably convulated and confusing) the new legislation says that borrowers have 2 options. EITHER to pay their loan origination fee OR to accept a higher interest rate and have the lender paid the loan origination fee. Seems simple, right?

Here’s where YOU, as their realtor, come in. Does the loan officer that your buyer is obtaining their loan from, even have TWO options? Many lenders are adopting ONLY the lender compensation and ONLY offering the higher rate option to your client. IF you buyer is unaware that their are two options available to them, they may not know to ask or search for another loan officer (me).

Keep in mind, many times a lender paid, higher rate option works best. My job is to ensure that BOTH are presented to the borrower so, through analysis, we can determine which is best.

Also, on the lender paid option, most lenders have adopted a MINIMUM amount in order to ensure the loan officer receives adequate compensation regardless of the loan amount. HOWEVER, the lender may have to increase the interest rate, considerably, in order to pay the minimum compensation to the loan officer, again dramatically impacting the quality of the loan for the borrower.

On another note, the new Loan Officer Compensation does NOT allow for ANYONE to pay for ANY additional costs associated with the loan OTHER than the borrower. This typically comes up under lock extensions. IF a loan needs to be extended at a cost, the buyer is the ONLY one that can pay that expense. NOT the loan officer. NOT the realtor. Regardless of WHY the lock needs to be extended AND given that this is a new expense, the buyer will need to re-disclosed this expense (with mandatory disclosure times) which could affect your close of escrow date.

Just be aware. Ask questions. If your business is referral based as mine is, it is critical we are advisors for our clients not just transactional.

Critical. Control. Credit. Critical is #1. Control is 1.1. Credit is #1.2. (All close in line is what I am trying to say)

I have talked to my son about all of these since he was a toddler. Little did he know when we were talking about how inappropriate it was for him to be throwing a fit while begging for candy at the grocery store, that we were really talking about his credit report. “You cannot get future great stuff without doing the right thing right now”

Critically think first, practice some control and know that credit is like breathing. Re-read that last sentence. If we all jumped out of bed, said “Goodmorning Day” and adopted that as our new mantra… where would we be?

So many clients come to me with the dream of home ownership only for me to tell them that their credit score it too low to qualify. They have worked their butts off, they have spent years saving the down payment money, they have changed their lifestyle to handle the new dream mortgage payment but skid…… no dream home for you. Their credit score is too low because last December, when they bought a new big screen TV instead of making the credit card payment, they forgot… “You cannot get future great stuff without doing the right thing right now” I have to also remind them that their credit score plummets and is like climbing Mount Everest to get the score back up again. THAT conversation is why I write this blog. Although titled “Kids and Money”, sometimes my 44 year old clients need to be reminded of the lessons they should have learned with they were 4.

The money may not grow on trees but it does come from gifts! I encourage my son’s family members to gift in the form of CASH. I know. I know. Most gift givers do not want to give cash but it feeds to the rest of my story. #1 He loves the cash. Most family members now give him the gift in the form of individual dollar bills. Admit it, it just seems like more. #2 We practice control. How much to keep? How much to deposit? #3 We make another trip in the “dream car” to the bank. With “whats my balance?” being the next thing out of his mouth. Music to my ears! #4 Once the whole journey is over, he is reminded just how important it is to think first, deposit second, spend third.

My parents have also started contributing directly into his 529 college fund. They will send him something small and a note that they have contributed towards his college.

This morning we had the “How can I make more money?” conversation. He is seeing his goal looming on the horizon. He turns 16 in 310 days, 8 hours and 23 minutes. Not that either of us are counting.